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What’s a Pooled Trust? A Way to Avoid the Nursing Home

NOW that most baby boomers’ parents have been retired for many years, perhaps even decades, what’s left of their retirement income often isn’t enough to pay for the rising costs of long-term care.

Many children will do whatever it takes to keep their elderly parents living within the comfort and security of their own home. But that can be particularly challenging for middle-class families who cannot afford private home care, but who have too much income or other assets to qualify for state-run Medicaid programs.

But there is a little-known way for some people in certain states to receive home care through Medicaid, without requiring them to impoverish themselves first. Here’s how it works: a federal law established in 1993 allows disabled people to put their monthly income or assets — above the amounts Medicaid allows them to keep — into a special type of pooled trust. They can then use the money in the trust to pay for their basic monthly bills like rent, a mortgage payment or cable television. Medicaid, meanwhile, pays for the home care.

“The trusts can really be a lifesaver and prevent someone from going into a nursing home,” said Wendy H. Sheinberg, an elder-law lawyer in Garden City, N.Y.

But it’s not always an easy road, and there is a long list of potential stumbling blocks to consider. For starters, signing up for the trust and submitting the bills each month requires a lot of paperwork; many elderly people will need to rely on a relative to handle it for them.

Any money left in the trust after the person dies is generally kept by the nonprofit organization running the trust or paid back to Medicaid — that may not be such a huge loss, however, if the person is contributing only income above the Medicaid threshold on a monthly basis.

The pooled trusts themselves, meanwhile, are available only in about a dozen states for people over the age of 65, according to Special Needs Answers, an informational Web site run by the Academy of Special Needs Planners. And since the rules governing Medicaid are intricate and differ in each state, the trusts work more effectively in some states, like New York, than in others. It can also be challenging to receive home care through Medicaid, since services continue to be reduced with continuing pressures to rein in state budgets.

But for those who can enroll, it can make a huge difference in their lives. Consider someone living in New York. To qualify for Medicaid, a single individual’s monthly income cannot exceed $767, while a married couple can have no more than $1,117.

Similar to a deductible, anything above those amounts — minus the cost of their health care premiums — must first be spent on medical bills before the person can receive Medicaid. But living on the monthly income the senior is allowed to keep is nearly impossible.

That’s where the pooled trusts come in. Each month, a person who has been deemed disabled can deposit her or his excess income into the trust, which must be run by nonprofit organizations. (The organizations are often set up for the sole purpose of running the trust, while others might provide other services like helping people with disabilities.)

Photo

SETTING UP CARE: Diane Agranoff and her mother, Florence Goldsmith. “My mother took care of me, so I am going to take care of her,” Ms. Agranoff said.Credit
Ángel Franco/The New York Times

The trust pays the disabled person’s bills — as long as the expense is for the sole benefit of the participant. The trust can refuse to make payments that look questionable, and the money can’t be used for things like gifts to grandchildren. The family must be comfortable with ceding control of the money.

“The whole nature of the trust is about supplementing your needs not met by the government programs,” said Valerie J. Bogart, director of the legal program at Selfhelp Community Services in New York.

Diane Agranoff, of Bayside in Queens, set up a pooled trust for her 83-year-old mother, Florence Goldsmith, who has Parkinson’s and lives in a nearby apartment complex for seniors. Before she set up the trust, Ms. Agranoff — who also pays rent for her 26-year-old daughter, who is enrolled in a graduate program for physical therapy — hired private aides, which consumed her mother’s savings and part of her own.

With the assistance of Selfhelp’s advocates, she was later able to qualify her mother for round-the-clock home care through Medicaid. Now, she uses the trust money to help pay for her mother’s living expenses.

“My mother took care of me, so I am going to take care of her,” said Ms. Agranoff, adding that she does not believe her mother would survive if she had to live in a nursing home.

There are other restrictions, too, that make the trusts work particularly well for those who have few assets, but may own a home. Medicaid recipients receiving home care in New York, for instance, can keep only $13,800 in assets, or $20,100 if they are married (limits may be much lower in other states). That excludes their primary home (there is a home equity limit of $750,000 for single people), a car and individual retirement accounts, though required minimum distributions must be taken.

Another type of pooled trust can also be used to hold money that might otherwise disqualify someone from receiving Medicaid. But if the person needs to enter a nursing home within five years of putting that money in the trust, it could disqualify her from having Medicaid pay for that care for a certain period of time, Ms. Bogart said. And after the person dies, money left in the trust is lost.

There may be other ways to transfer assets above the Medicaid minimums to a healthy spouse or other individuals, but penalties and other risks may apply, so it’s best to consult a professional.

In fact, many states do not allow people over 65 to use the pooled trusts at all because they have interpreted the federal laws differently, according to Prof. Kim Dayton, director of the Center for Elder Justice and Policy at William Mitchell College of Law. And some states, like Michigan, have started to impose penalties on people over 65, said Michele P. Fuller, an elder-law lawyer in Shelby Township, Mich.

Finally, you need to vet the pooled trust itself — many people find them through elder-care lawyers or local nonprofit agencies that help the elderly — since many of them operate a bit differently. They typically charge recurring administrative fees. For instance, Nysarc, a nonprofit that operates a pooled trust in New York, charges $200 to set the trust up, a $50 annual fee and a monthly fee that is based on your monthly deposit (the average is $60 to $75). Other trusts may require high minimum deposits.

A version of this article appears in print on November 5, 2010, on page F4 of the New York edition with the headline: What’s a Pooled Trust? A Way to Avoid the Nursing Home. Order Reprints|Today's Paper|Subscribe